is it possible to use MySQL database hosted on another ISP from the silverstripe site?

Yeah, if you know that the details are correct and you've used them before. It might take time for the update to take effect too. I think I had to wait 24 hours as it was not instant... but saying that I think that was only the first time since then its been fine!

You could even test it with another host try out: http://www.freemysql.net/v2/
You can set up a free MySQL quickly with them as a test, I used to connect to one with out any trouble or extra settings.
This is the server name (for when/if you need it): SQL09.FREEMYSQL.NET

Good stuff glad it's working! I don't advise using freemysql in the long run tho as for me it made SS run slowly, when I moved my db it was much faster! but its free so you can't really complain. Also I found that exporting my db from them and then uploading it to the new host was very 'bitty' and I lost lots of it... anyway that's another story!